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Has the Economic Rebound Run Its Course?<\/a><\/strong><\/p>\n\n\n\n The economic recovery seems to be slowing with the\nreintroduction of Covid-19 restrictive measures, questions surrounding more\nstimulus and uncertainties as to when a vaccine will be released. Even in the\nface of so many uncertainties, 2021 still could be a big year for the economy\nwith pent-up demand in the wake of a potential vaccine. Therefore, it\u2019s\nimportant not to give into the negative narrative and for investors to position\nthemselves for the long-term.<\/p>\n\n\n\n To help you focus more on the hard data and economic\nindicators that could positively impact your investments, I am offering all\nreaders our just-released Stock Market Outlook report. This report contains\nsome of our key forecasts to consider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! _________________________________________________________________________<\/p>\n\n\n\n But there\u2019s a problem, in my view. The \u2018low hanging fruits\u2019\nof this economic rebound may have already run their course. Employers cut some\n22 million jobs in the early months of the pandemic, and like a light switch\nwere able to bring back 12 million jobs once the economy reopened. Recovering\nthe next 10 million jobs, however, poses a far greater challenge \u2013 one that\ncould take years. <\/p>\n\n\n\n We also must consider that businesses are likely to look\nmuch different on the other side of the pandemic. Industries like airlines,\nmovie theatres, restaurants, and retailers have spent much of the year\ncompletely rethinking their business models, and one common takeaway seems\nclear: they don\u2019t need as many workers. Adjustments made at the business level\nmay cause dislocations in the labor market, and in many cases, result in a\ngreater number of permanent job losses. Had the pandemic only lasted three or\nfive months, this may not have been an issue. But it\u2019s gone much longer. <\/p>\n\n\n\n The Wall Street\nJournal <\/em>recently surveyed a handful of private sector economists and CEOs,\nand found that more than half of respondents did not expect the job market to\nfully recover until 2023 or later. As the pandemic continues to spread and some\nstates consider re-introducing restrictive measures, the economic recovery\ncould be entering a tenuous phase. More fiscal stimulus is almost certainly\nneeded. <\/p>\n\n\n\n The Economic Silver\nLining<\/strong><\/p>\n\n\n\n The U.S. economy is facing a challenging couple of quarters,\nbut there are a few upshots to keep in mind. The first is the vaccine. <\/p>\n\n\n\n Both Pfizer and Moderna have made recent announcements that\ntheir vaccines are proving highly effective, both sporting over 90% efficiency.\nMost estimates place full-scale distribution by sometime next spring, which\nmeans another four or five months of pandemic-related drags to growth. <\/p>\n\n\n\n A second upshot is that in this four or five-month period,\nthere is a chance of more fiscal stimulus being injected into the economy. To\nbe sure, the odds of major fiscal stimulus seem to be falling quickly \u2013 a Republican-controlled\nSenate is not likely to hand the Biden administration an easy win early in the\nnew term. But in my view, the need for fiscal stimulus is largely a bi-partisan\nissue, as states across the union are hurting. The deal may just be much\nsmaller than previously anticipated. <\/p>\n\n\n\n Finally, there is the matter of pent-up demand across the\nU.S. economy. U.S. households have been saving during the pandemic, to the tune\nof about 20% of after-tax income since April. Studies have also shown that a\nbig chunk of households socked away the government stimulus checks and some of\nthe extra $600 a week in unemployment benefits. The personal savings rate\nshot-up in 2020, as shown in this chart:<\/p>\n\n\n\n Source: Federal Reserve Bank of St. Louis3<\/sup><\/em><\/strong><\/p>\n\n\n\n When the risk of the pandemic fully fades, consumers are\nlikely to be eager to get out and spend again. More fiscal stimulus in the\nmeantime would only add to this pent-up demand, in my view.<\/p>\n\n\n\n Bottom Line for\nInvestors <\/strong><\/p>\n\n\n\n The economic recovery to date has been swift, but I think\nit\u2019s fair to say it\u2019s been losing steam \u2013 particularly as the pandemic worsens.\nWe are likely entering a challenging phase of the rebound, where growth is\nlikely to slow and job gains may be much more difficult to come by. The next two quarters may\nshow an economic recovery that\u2019s faltering, not strengthening. <\/p>\n\n\n\n The upshot, in my view, is that there is plenty of pent-up\ndemand and capital market liquidity to spur a surge in economic activity once\nthe risk of the pandemic fades, which could come as early as this spring. If the\ngovernment manages to pass some fiscal stimulus in the meantime, and the\nvaccine proves effective and efficiently distributed, 2021 could be a big year\nfor the economy. Equity investors should be positioning for such an outcome\ntoday, in my view. <\/p>\n\n\n\n
IT\u2019S FREE. <\/strong>Download the Just-Released December 2020 Stock Market Outloo<\/a>k<\/a>2<\/sup><\/strong><\/p>\n\n\n\n![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/1_pic-1024x395.png\")
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